Income Tax Severed Letters - 2018-05-16

Ruling

2017 Ruling 2016-0660321R3 - Reorg of REIT to simplify multi-tier structure

Unedited CRA Tags
132.2; 132(6); 87; 97
Summary Under
Tax Topics - Income Tax Act - Section 132.2 - Subsection 132.2(1) - Qualifying Exchange
use of the s.132.2 merger and a renunciation of most of the units otherwise issuable on the merger in order to eliminate a REIT corporate subsidiary held through an LP and a sub-trust
Summary Under
Tax Topics - Income Tax Act - 101-110 - Section 107.4 - Subsection 107.4(2) - Paragraph 107.4(2)(a)
s. 107.4 transfer of sub-trust’s assets to sister MFT trust
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3)
drop down of LP 1 into LP 2 followed by immediate s. 98(3) wind-up of LP 1 into LP 2 and GP of LP1, followed by immediate taxable sale by GP to LP 2
Summary Under
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)
no taxable benefit where wholly-owned partnership renounces the right to have consideration paid for the redemption of its shares in its limited partner (a mutual fund corporation)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition
no disposition of partnership interests or property on conversion of general to limited partnership or adding right of renunciation of a MFT unitholder
Summary Under
Tax Topics - Income Tax Act - Section 132.2 - Subsection 132.2(3) - Paragraph 132.2(3)(g) - Subaragraph 132.2(3)(g)(vi) - Clause 132.2(3)(g)(vi)(C) - Subclause 132.2(3)(g)(vi)(C)(I)
renunciation by subsidiary partnership of transferee MFT of units that otherwise would be issuable on the redemption of its incestuous holding in transferor MFC

Principal Issues: 1. Will the status of the Fund as a mutual fund trust be affected by the proposed reorg; 2. Will changes to the Declaration of trust cause a resettlement of the trust; 3. Will the proposed reorg be a qualifying exchange?; 4. Will GAAR apply to the transactions?

Position: 1. No 2. No 3. Yes 4. No

Reasons: 1. 132(6) will still be met. 2. Changes not significant enough to cause a resettlement. 3. 132.2 requirements will be met. 4. In line with previous rulings - gaar does not apply

2017 Ruling 2016-0680261R3 - Loss consolidation arrangement

Unedited CRA Tags
20(1)(c); 112(1); 88(1); 245(1)

Principal Issues: Whether a loss consolidation arrangement involving a loan to buy preferred shares for the purposes of earning income would meet the CRA's requirement for acceptable loss consolidation transactions. As a result of the loan, interest income would be earned by the lossco (“Lossco”) and the profitco (“Opco”) would access losses incurred by a corporation formed specifically to acquire the preferred shares (“Aco”). At the end of XXXXXXXXXX, ACo would be wound up into Opco, thus permitting Opco to claim Aco's non-capital losses.

Position: Yes.

Reasons: Consistent with previous rulings.

2017 Ruling 2017-0693691R3 - Loss utilization

Unedited CRA Tags
13(7)(e); 85(1); 88(1); 245(2); RAIR 21

Principal Issues: Whether a transfer of depreciable property between related corporations designed to utilize capital losses is subject to GAAR?

Position: No. Similar to rulings 2000-0014543 and 9418413.

Reasons: Ruling 9419413 was presented to the GAAR Committee and it was concluded that GAAR would not apply.

2016 Ruling 2016-0626531R3 - Loss consolidation arrangement

Unedited CRA Tags
20(1)(c); 112(1); 88(1); 245(1)

Principal Issues: Whether a loss consolidation arrangement involving a loan to buy preferred shares for the purposes of earning income would meet the CRA's requirement for acceptable loss consolidation transactions. As a result of the loan, interest income would be earned by the lossco (“Lossco”) and the profitco (“Opco”) would access losses incurred by a corporation formed specifically to acquire the preferred shares (“Aco”). At the end of XXXXXXXXXX, ACo would be wound up into Opco, thus permitting Opco to claim Aco's non-capital losses.

Position: Yes.

Reasons: Consistent with previous rulings.

Technical Interpretation - External

12 April 2018 External T.I. 2016-0640651E5 F - Swiss Pension

Unedited CRA Tags
248(1) "superannuation or pension benefit"
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - superannuation or pension fund or plan
Swiss vested benefits policy was a “superannuation or pension fund or plan”
Words and Phrases
superannuation or pension fund or plan
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i)
a Canadian resident was not subject to Canadian tax on income accruing in a Swiss vested benefits policy

Principales Questions: Whether the income derived from a Swiss Pillar 2 vested benefits policy (the “Policy”) held by a Canadian taxpayer is included in computing his income under the Act during the accumulation period.

Position Adoptée: Likely not.

Raisons: Subject to the review of all facts and circumstances surrounding the relevant situation, we are of the view that the Policy is a superannuation or pension plan for the purpose of the Act. Therefore, the accumulated income will only be included in the Canadian taxpayer's income at the time of receipt under paragraph 56(1)a).

Technical Interpretation - Internal

2 February 2018 Internal T.I. 2017-0728331I7 - Central paymaster - partnership

Unedited CRA Tags
Regulation 402.1
Summary Under
Tax Topics - Income Tax Regulations - Regulation 402.1 - Subsection 402.1(5)
application of the paymaster rules to salaries paid by a partnership
Summary Under
Tax Topics - Income Tax Regulations - Regulation 402 - Subsection 402(6)
exclusion from payroll allocated to partners for Reg.402(6)

Principal Issues: Whether a partnership, that is an employer, is a “person” for the purposes of the central paymaster rules provided by subsection 402.1(1) of the Income Tax Regulations (the “Regulations”).

Position: Yes.

Reasons: Subsection 402.1(5) of the Income Tax Regulations provides that a partnership is deemed to be a corporation for the purposes of the central paymaster rules provided by section 402.1. For the purposes of the Income Tax Act, subsection 248(1) provides that the meaning of “person” includes a corporation. Pursuant to section 16 of the Interpretation Act, this definition also applies to the Regulations. Therefore, where the employer is a partnership, the rules in Regulation 402.1 apply such that the salary or wages earned by an employee for the performing of a service in a particular province for the benefit of a corporation that is not the partnership employer are deemed to be salary or wages paid by the corporation to an employee of its permanent establishments in the province if the corporation and the partnership employer do not deal at arm’s length and the corporation has a permanent establishment in the province.